Friday, February 29, 2008

Comscore search numbers for Dec 07

Baidu: 3.4 billion searches, 5.2% share
Total: 66.2 billion searches.

One suspects the global Comscore numbers
are deeply flawed. Considering the number
of users in China, and Baidu's share there,
their real global share has to be higher.
Posting them just for comparison purposes
down the road.

Baidu publishes Real estate industry report

Baidu has released a "Real Estate
Industry Report" and stated that
it will intensify its cooperation
with traditional real estate
industry advertisers to compete
within the industry's advertising
market. A Baidu source said that
the company is able to accurately
identify groups of potential
real-estate buyers and serve as
a valuable reference in real estate
market analysis and forecasting.

Report from Marbridge daily/Sohu IT

Baidu starts testing IM service - Baidu Hi

Baidu started internal tests on its first
instant message software Baidu Hi today, reported.

Employees have to submit applications
through internal networks to get
approval to download Baidu Hi, the
report said.

Baidu Hi, Baidu's "strategic" new product,
was wholly and independently developed by
the company in terms of product design,
research and test process, the report said.

Profit from the instant message market on
the Chinese mainland reached up to 4.75
billion yuan (US$668 million) last year
and the figure is expected to jump by at
least 30 percent annually to 8.76 billion
yuan in 2009, the report said.

Currently, the instant message market on
the mainland is dominated mostly by
Tencent's QQ with Microsoft's MSN a
distant second.

Thursday, February 28, 2008

Baidu's strategy on music copyright issues

Baidu plans to resolve copyright disputes
by instituting revenue sharing or record
promotion strategies, reports Guangzhou
Daily. Baidu currently applies these
strategies to approximately 60 record
company partners including EMI Music
and Taiwan's Rock Records and Tapes.
Baidu said it highlights the protection
of Internet-based intellectual property
rights and has taken measures to
protect intellectual property rights.

Wednesday, February 27, 2008

Baidu denies acquiring Maxthon

Yang Haijun, a Baidu spokesman, said he was
unaware of such an acquisition and had no
further comment.

Reported by XFN-Asia

Baidu to release real estate industry report

Baidu has been releasing research
reports on consumer preferences
based on its vast keyword search
database. This year it will add
a real estate industry report to
the list. It already releases
reports on the mobile phone industry,
the Olympics, the PC industry,
household electrical appliance
industry, the cosmetics industry,
the beverage industry, the banking
industry, investment funds, online
games, and the automotive industry.

Baidu teams up with KingSoft

Kingsoft Corporation Ltd, an entertainment
and applications software developer, said
it has teamed up with Baidu to launch a
free internet security service.

The newly launched service, Baidu Security
Center, is an anti-virus, anti-spyware and
Internet browser recovery system which will
reach a potential 200 mln users, it said.
The company did not provide financial details
of the strategic partnership. As of now,
the service doesn't support Firefox and
Windows Visa.

Beijing-based Kingsoft has developed into one
of China's leading software developers, with the
company having four R&D centers located in
Beijing, northeastern Dalian, southern
Guangdong's Zhuhai and southwestern

Tuesday, February 26, 2008

More music providers sue Baidu

Wu Jun, CEO of digital music copyright trade
platform R2G, revealed that the company
has filed a lawsuit against Baidu for copyright
violation, and will ask for related compensation.

Qu Jingming, Director of the Music Copyright
Society of China (MCSC) said that MCSC had
also filed a lawsuit against Baidu on January 17
at Beijing Haidian District People's Court,
claiming that Baidu had provided free downloads
of lyrics to netizens, thus violating copyright
owners' rights. MCSC has also urged Baidu to
immediately stop the service and provide
compensation of RMB 1.06 mln.

Reported by 21st century Business Herald.

Baidu to acquire KooMail

They provide email clients and services.
News not confirmed by either Baidu or

Monday, February 25, 2008

Baidu's investments in startups

Baidu has acquired or invested in Hao123,
Ku6 (video sharing site, and exclusive video
provider to Baidu's postbar), Adsit, TTPlayer,
a music player, and, a software
download site, and is rumored to have invested
in, and

Sohu report: Baidu to acquire Maxthon

Maxthon is the second most popular browser in
China after IE, with almost 18% market share.
In addition to a browser, they offer software to
share desktop contents across a browser (kind
of like Microsoft's foldershare).

Neither Baidu nor Maxthon has confirmed the

Sunday, February 24, 2008

New iResearch report: search mkt at 5.16 billion Yuan

Search expected to be 30% of total online ad revenue.
Assuming Baidu maintains its market share of 60.9%,
that gets to be 3.142 billion Yuan. Which is about 440
million dollars, at today's rate. About 2 to 3% higher
than the current average analyst estimate. The Yuan
can safely be expected to appreciate 5 to 10% on top
of this.

Shanghai daily article

Tuesday, February 19, 2008

Analysts: reiterates buy

Price target $315. GS meanwhile claims
growth will slow down and hence the stock
may not go up much. Another analyst
had said the exact same thing about Sohu
a few weeks ago, James seems to be
repeating it as an added pulldown on the

Baidu censured for spreading nude pictures of HK stars

Beijing Association of Online Media, a semi
government organization censured Baidu
for allowing pictures of Edison Chen and
several of his girlfriends nude. Seemingly
not in groups though. Another government
tries and fails to stop the oldest obsession.

The report

Friday, February 15, 2008

Baidu stock ownership SEC filings

A bunch of owners filed yesterday.

Fidelity FMR LLC reduced stake from 6.225% (11/13/07)
to 1.474%.

Morgan Stanley upped from 5.1% (2/20/07) to

Wellington Management LLP sold their entire
6.65% stake they had on 2/14/07.

JP Morgan upped its stake to 6.2%.

UBS AG has ended with 5.83%

Mirae Global Asset Management, Hong Kong, reduced
their recent buy to 4.7% from 5.2% (01/02/08).

Robin Li has 16.35%. The portion he divested to his
wife can no longer be tracked, and is best thought
of as sold.

The major holders left are:

Robin Li: 16.35%
Morgan Stanley: 6.7%
JP Morgan: 6.2%
UBS AG: 5.83%

SEC filings

Thursday, February 14, 2008

Baidu's search share grew to 72% in Q4: iResearch

from 69% in Q3. Robin Li quoted the numbers in
the Q4 07 earnings conference call.

Q4 07 earnings CC transcript

Analysts: action summary

Bear Stearns: Peer perform maintained, no target maintained

Canaccord Adams: Sell maintained, $265 maintained

Citigroup: Hold maintained, $350 maintained

Credit Suisse: Underperform maintained, reduced from $235
to $234 (Note: Symbolic?)

Goldman Sachs: Neutral maintained, reduced from $31o to

JP Morgan: Overweight maintained, reduced from $400 to

Merill Lynch: Buy maintained, reduced from $430 to $410

Morgan Stanley: Equal weight maintained, no target maintained

Needham: Hold maintained, no target maintained

Piper Jaffray: Buy maintained, reduced from $439 to $430
(Note: highest on the street)

RBC Capital Markets: Upgraded from sector perform to
outperform. Reduced from $400 to $361. Cuts
2008 EPS estimate to $4.00 from $4.65, and
2009 EPS estimate to $7.48 from $8.19.

SIG: Maintained positive, maintained no target

Analysts on Q4 07 earnings: JPM, RBC, Citi, GS, Needham, Pac Crest

JPM basically where they were at before
earnings. Feels 1Q08 outlook is murky, but
leaves outperform rating unchanged based
on long-term growth prospects.

RBC upgrades to an outperform, lowering
price target to $361 from $400. Fairly
bullish on growth prospects, looking past

Citi thinks earnings inflated by a one-time
tax rebate, yuan appreciation and underspending
on Japan. [My note: Yuan appreciation is real
and going to continue for at least a few more
years - so it doesn't have to be looked at
separately]. Maintained Hold and $350

GS believes 1Q08 lower guidance isn't due to
the snow storm, but due to the law of large
numbers slowing Baidu down. Gives zero
support for their thesis. Reduces target to

Needham reiterates their earlier stance of
a hold rating.

Pacific Crest reiterates their buy based on
long-term outlook.

All in all, status quo maintained.

Wednesday, February 13, 2008

Google China's music venture limited in scope

Google China will cooperate with Top100 to
provide a free MP3 search and download service.
The service will be carried on's site,
with trial listening and free download of some of
the music directly from Google China's servers. will provide licensed music content.

The cooperation reportedly differs from other
music search and linking services, in that
Google China will encrypt the music and
require a digital certificate for listening.
However, this may limit users to playing
the music on their PCs, without the option
of transferring files to MP3 players, mobile
phones or other mobile devices.

Accordingly, many industry pundits believe the
cooperation will be ineffective in competing with
Baidu, but may put Google on similar footing with
Sina Music, or Aigo Music, which currently offer
similar services.

Top 100 was founded by Yao Ming, Yao Ming's
agent and cousin Erik Zhang (Zhang Mingji) and
music industry professional Gary Ge Chen
(Chen Ge). Previously it was reported that Google
had invested in

Marbridge consulting report

Robin Li on the Japan venture

  • Says adult content now filtered by default
    (personally, I find that sad and bad).
  • Japanese MP3 files in China get removed when music companies complain about them.
  • On piracy issues, Baidu will follow the lead of Yahoo and Google in Japan - so Baidu is less likely to be subject to lawsuits.

RBC cautious on Baidu's outlook

both for Q1 and full year 08. Management change
(1 resignation, 1 death), and the snow storm cited
the reasons. Believes 1Q08 will be flat to down
2 or 3% sequentially. Maintains sector perform,
and bullish long-term outlook based on search
market share.

Monday, February 11, 2008

UBS AG owns about 5.8% of Baidu

Form SC 13G filing

Analysts: Pacific Crest upgrades to outperform

Weinstein expects revenue of $67.5 million
and EPS of 69 cents, lower than the average
$76.9 million and 71 cents.

Projects 100% revenue growth or more for the
next two years, driven by growth in
advertisers as Baidu penetrates more markets
and increases spending per advertiser.
Thinks Google China's entry into music, which
has fueled new competitive concerns, are
probably overdone.

Sunday, February 10, 2008

Broadband service to reach 95% of villages

Currently at 92%. Some central and Eastern provinces will
have 100% township/village coverage by 2008 end. Of the
73 million new Internet users added last year, 40% were
from rural areas.

3% extra coverage is almost 30 million users just from extra
coverage (assuming a base of about 1 billion). There will
also be new users in the already covered areas.

China org report

Friday, February 8, 2008

Analysts: Piper reiterates Baidu buy at $439

Doesn't expect anything to change on the music download
scene, since licensed stuff is going to be a small share,
and a previous lawsuit on the way Baidu links to
unlicensed stuff was defeated. Also believes music searches
make up about 10-15% of Baidu's traffic.

Basically the report reaffirms the status quo.

Tuesday, February 5, 2008

Analysts: Goldman's $310 target

Goldman reiterated this sometime ago. In
the light of new data, GDP figures and
Yuan appreciation, let us check the
model out again. Here is Goldman's
original analysis:

In a scenario where China’s economy in
2013 is half the size of the US economy
today (as our economists forecast), and
where Baidu’s market cap in 2013 is half
as large as Google’s US-attributable
market cap today, we estimate that
owning Baidu stock for five years will
generate an attractive IRR of about 25%
per year. However, we believe structural
differences between developed world and
China search environments could reduce
this IRR to a mid-teens rate, given the
presence of Google as a cash-rich rival,
the existence of low cost-to-seller
marketplaces in China, and the dependence
on salespeople to drive search customer

In 2007, China's GDP was at 3.43 trillion, and
US GDP at 13.485 trillion (2.2% rise from 06).
Assuming an average GDP growth rate of
10%, and an average Yuan rise of 10%,
China's GDP will be 1/2 that of today's US
GDP in 3.55 years. This comes from
log(13.485/2/3.43) / log(1.10 * 1.10)

Google's current market cap is around
$160 billion, with half of its revenue from
the US. Its US-related market cap is $80
billion, and for an economy half that size,
that translates to $40 billion.

Per this model, Baidu should be a $40
billion company in 3.55 years. So what
should be its value today?

That calculation depends on what rate
of return you can get on other
investments. For a AAA rated bond,
let us assume a rate of 4%, and for a
junk bond, a rate of 9%.

If you believe Baidu's growth story for
the next 4 years is as credible as a AAA
rated bond, then its current market
cap should be $33.64 billion.
(40 b / 1.04-raised-to-3.55)

If you believe Baidu's growth story for
the next 4 years is as credible as a
junk-rated bond, then its current market
cap should be $29.45 billion.
(40 b / 1.09-raised-to-3.55).

Interestingly enough, Goldman based
its final target price not on the model
they describe, but on a traditional
P/E metric, comparing a startup,
Baidu, to an established company,

The main risk in the model is
assuming search ads as a share of
the total economy will be about the
same for the US and China. One
could argue Internet penetration
is much lower in China and so
search ads have less reach. On the
other hand, one could argue Internet
penetration is significantly higher in
regions contributing most to the
GDP, and so online ads have a
significant influence on the meatiest
part of the economy.

Monday, February 4, 2008

IFPI files another lawsuit against Baidu

Sony, Warner, and Universal filed suit against
"Deep Linking" on Baidu's music channels.
The suit was filed in Beijing No.1
Intermediate People's court. The above 3,
and Golden Label, filed another suit against
Sohu for substantially same reasons, in the
same court.

Roughly 9% of Baidu's traffic comes from
MP3 search. It is unclear how much of that
belongs to the above 3 companies. Baidu
has agreements with China's biggest record
label - Rock - and with EMI.

Sunday, February 3, 2008

Analysts: Impact of Microsoft/Yahoo deal on Baidu

Citi, Goldman Sachs and BNP Paribas weigh
in on what if Microsoft buys not just Yahoo
(as per their current offer), but also
Yahoo's assets in China (its stake in
Alibaba), and decides to pull MSN's
contract with Baidu.

Jason Brueschke of Citi, who
did a survey in March 07 and found
most online advertisers were thinking
of switching to Google from Baidu,
thinks the biggest loser from the
Microsoft/Yahoo deal is Baidu. Goldman
Sachs is more circumspect, saying
Baidu's revenue loss would be in the
very low single digits. BNP Paribas
says there would be no significant

The CNN/Dow newswire report